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Gold Exchange Traded Funds

Investing in gold is an appealing option in times of panic or inflationary concern. The governments of the world can always print more money, but there's only so much gold out there. While there are many ways to invest in gold there are problems with each of them. For many, using an gold exchange traded fund is the easiest and most efficient way.

Advantages of Physical Gold

While there are tradeoffs to the various investment options, physical gold has some advantages over other alternatives:

No Counter Party Risk - When you deal in the ephemeral products available in markets like ETFs, there is the risk that the other party will not honor his or her obligation to deliver the gold. Once you have the physical gold in your possession, this is not a risk.

Easy Access - Many people who own gold do so out of fear of economic turmoil. If there is societal chaos, owning shares in a gold ETF are not going to do you much good.

Decoration - Of course you also have the advantage of being able to decorate with your gold. While this may seem trivial, it is a synergy that isn't available in "paper ownership" of gold.

Advantages of Exchange Traded Funds

While there are some advantages to taking physical possession of the gold, there are also some risks:

Theft Risk - Having gold physically accessible also means it's available for thieves. This can be a serious problem. You can keep it in a safer place, such as a bank, but then you lose many of the advantages of owning the physical gold in the first place.

Transaction Costs - Typically you will experience higher fees associated with physical gold. ETFs are much more efficient markets with fewer mark-ups and less slippage. This can make it much easier to profit on a trade in gold through an exchange traded fund.

Easier Transactions - It is much easier to buy and sell gold securities than gold itself. You can typically buy and sell gold exchange traded funds online in a matter of seconds, whereas buying and selling actual gold can be an ordeal.

Other Ways to Invest In Gold

Depending on your motivations there are other ways to invest in gold. One of the most obvious is to invest in companies that mine gold. If the price of gold appreciates, then those companies that mine the gold should benefit as well. This of course has the same disadvantages of owning an ETF, as well as needing to do your due diligence on the company in question.

Ultimately there are many ways to own gold and each have their advantages and disadvantages. Be sure to choose the option that actually meets your objective in investing in gold in the first place.